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As of the close of 2000, petitioner had not attained the age
of 59 �. At the time, her outstanding loan balance from the
retirement plan was $16,098 (the distribution). The distribution
is reported on a Form 1099-R, Distributions From Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., issued to petitioner by USPS.
Petitioner filed a timely 2000 Federal income tax return.
In addition to other items, the distribution is included in the
income reported on that return. The Federal income tax reported
on her 2000 return does not include the additional tax imposed by
section 72(t). In the notice of deficiency, respondent
determined that petitioner is liable for the additional tax
imposed by section 72(t) with respect to the distribution.
Discussion2
Section 72(t)(1) imposes an additional tax on early
distributions from qualified retirement plans “equal to 10
percent of the portion of such amount which is includable in
gross income.” Failure to make any installment payment when due
in accordance with the terms of a loan from a qualified
retirement plan may result in a taxable distribution. Sec.
72(p). Accordingly, a loan that constitutes a taxable
distribution is subject to the 10-percent additional tax on early
2 Petitioner does not argue for the application of sec.
7491.
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